TVA electricity rates jump 20 percent today

FLORENCE - As she paid her utility bill Tuesday, Martha Hubbard took little comfort in knowing the next one she pays will be much higher, even if she uses no additional electricity or water.

The wholesale price of electricity jumped 20 percent today across north Alabama and portions of six other states as the Tennessee Valley Authority tries to cope with the rapidly rising cost of coal and power that it purchases from other utilities.

For the average resident of the Tennessee Valley, the increase will mean about $20 more per month on the electric bill.

"I cannot understand why the power bills are going up so much," Hubbard, of Florence, said after paying her September bill at the city's utility department. "We have Browns Ferry, Wilson Dam and Wheeler Dam all in this area producing plenty of electricity. With all that power they are producing, it don't make sense for TVA to be going up much on its rates."

TVA spokesman Gil Francis said the rate adjustment, the largest in 34 years for the utility, is needed to help TVA pay for the coal used to produce the bulk of its electricity and other expenses.

"Central Appalachian coal that we were buying for about $60 per ton in January was costing $140 per ton in August," he said. "The cost of transporting that coal to our power plants has also increased. When we have to purchase power from other utilities to meet peak demands, that also costs us more than it did at the beginning of the year. Plus our hydroelectric generation remains about 50 percent of normal for the year, which forces us to burn more coal and purchase more power to meet our customers' demands for electricity."

Most utilities will increase their rates by about 16 percent today, which is the retail level equivalent of the 20 percent wholesale price increase.

Florence Utilities will raise its rates 16 percent and is considering an additional 3 percent increase.

Richard Morrissey, manager of the Florence Electricity Department, said the 3 percent local increase, which Florence council members are scheduled to vote on Oct. 7, is needed to help the utility cope with the rising cost of supplies, fuel for its vehicles and other expenses.

The last local increase for the department was in 2003 when rates were raised 1 percent.

The Florence proposal has been the target of much criticism among residents who contend the city should not be raising utility rates on top of the massive TVA increase. Morrissey said without the increase, the utility department will have to postpone maintenance on its system and make other cuts. "If we don't get this rate adjustment, the reliability and quality of the service we provide our customers could suffer."

Other utilities around the Shoals have no plans to tack on additional increases at this time.

"Ours is just a pass-through increase," said Alan Hughes, general manager of Sheffield Utilities. "We can't afford to absorb the increase from TVA. We have to pass it on to our customers."

Rickey Thomas, general manager of the Muscle Shoals Electric Board, said the increase will boost monthly electric bills there by an average of $21.48, where electricity usage is slightly above the Tennessee Valley average. He said the typical Muscle Shoals Electric Board customer uses an average of 1,432 kilowatt hours of electricity per month. The average Tennessee Valley home uses 1,320 kilowatt hours of electricity each month, according to a TVA report.

David Thornton, general manager of Tuscumbia Utilities, said the Tennessee Valley is not alone is seeing the cost of electricity rise.

"I've got a son who lives in Mississippi who told me the rates there went up 28 percent," he said.

By comparison, Alabama Power Co. sought a 14.6 percent rate increase in September that was trimmed to 8.2 percent by the state Public Service Commission. The increase is expected to boost monthly power bills by $9.30 per month for the typical Alabama Power household customer.

Steve DeFoor, manager of the Russellville Electrical Board, said soaring demand for electricity in China is a driving force behind the rising power bills around the United States. He said China is building coal-fired power plants at a rapid pace with a new plant being completed almost every week. As China imports more coal to supply those plants, the cost of the fuel rises on world markets.

Francis said TVA will spend $800 million more for coal in 2009 than it spent this year. If coal prices decline during the coming year, TVA will adjust its rates to reflect the fuel savings, he said.

With the spike in the price of electricity, Tammy McDaniel, executive director of the Community Action Agency of Northwest Alabama, expects to see more area residents asking the agency for help to pay their utility bills this winter, she said.

McDaniel expects the agency will receive federal money in late December or early January that it can use to help residents pay utility bills during the winter heating season. She warns that even if the agency receives the money, the aid will be limited, and eligible residents will receive help paying only one utility bill during the heating season. In addition, the agency can provide residents with tips for conserving energy at that home.

Francis said home energy conservation tips are available on TVA's energy conservation Web site, energyright.com. Visitors to the site who complete a home energy audit online will receive a collection of compact fluorescent lamps and other conservation tools.

Francis said household customers who implement all of the recommendations of the energy audits can save $2 to $4 monthly on their power bill.

Dennis Sherer can be reached at 740-5746 or dennis.sherer@TimesDaily.com.